Correlation Between 3BB INTERNET and Home Product

Can any of the company-specific risk be diversified away by investing in both 3BB INTERNET and Home Product at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining 3BB INTERNET and Home Product into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3BB INTERNET INFRASTRUCTURE and Home Product Center, you can compare the effects of market volatilities on 3BB INTERNET and Home Product and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in 3BB INTERNET with a short position of Home Product. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3BB INTERNET and Home Product.

Diversification Opportunities for 3BB INTERNET and Home Product

0.65

Correlation Coefficient

3BB INTERNET  Home Product

Poor diversification

The 3 months correlation between 3BB and Home is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding 3BB INTERNET INFRASTRUCTURE and Home Product Center in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Product Center and 3BB INTERNET is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on 3BB INTERNET INFRASTRUCTURE are associated (or correlated) with Home Product. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Product Center has no effect on the direction of 3BB INTERNET i.e., 3BB INTERNET and Home Product go up and down completely randomly.

Pair Corralation between 3BB INTERNET and Home Product

Assuming the 90 days trading horizon 3BB INTERNET INFRASTRUCTURE is expected to under-perform the Home Product. But the stock apears to be less risky and, when comparing its historical volatility, 3BB INTERNET INFRASTRUCTURE is 1.93 times less risky than Home Product. The stock trades about -0.25 of its potential returns per unit of risk. The Home Product Center is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  955.00  in Home Product Center on October 25, 2024 and sell it today you would lose (60.00) from holding Home Product Center or give up 6.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

3BB INTERNET INFRASTRUCTURE  vs.  Home Product Center

3BB INTERNET INFRAST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 3BB INTERNET INFRASTRUCTURE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Home Product Center

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Home Product Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Home Product is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with 3BB INTERNET and Home Product

The main advantage of trading using opposite 3BB INTERNET and Home Product positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3BB INTERNET position performs unexpectedly, Home Product can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Home Product will offset losses from the drop in Home Product's long position.

The idea behind 3BB INTERNET INFRASTRUCTURE and Home Product Center pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.